Correlation Between Solstad Offshore and Enlight Renewable

Can any of the company-specific risk be diversified away by investing in both Solstad Offshore and Enlight Renewable at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Solstad Offshore and Enlight Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Solstad Offshore ASA and Enlight Renewable Energy, you can compare the effects of market volatilities on Solstad Offshore and Enlight Renewable and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Solstad Offshore with a short position of Enlight Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and Enlight Renewable.

Diversification Opportunities for Solstad Offshore and Enlight Renewable

0.0

Correlation Coefficient

Solstad Offshore  Enlight Renewable

Pay attention - limited upside

The 3 months correlation between Solstad and Enlight is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Enlight Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enlight Renewable Energy and Solstad Offshore is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Solstad Offshore ASA are associated (or correlated) with Enlight Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enlight Renewable Energy has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and Enlight Renewable go up and down completely randomly.

Pair Corralation between Solstad Offshore and Enlight Renewable

Assuming the 90 days horizon Solstad Offshore is expected to generate 22.14 times less return on investment than Enlight Renewable. But when comparing it to its historical volatility, Solstad Offshore ASA is 14.12 times less risky than Enlight Renewable. It trades about 0.04 of its potential returns per unit of risk. Enlight Renewable Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  196.00  in Enlight Renewable Energy on September 21, 2024 and sell it today you would earn a total of  1,350  from holding Enlight Renewable Energy or generate 688.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Solstad Offshore ASA  vs.  Enlight Renewable Energy

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solstad Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Enlight Renewable Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enlight Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Enlight Renewable is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Solstad Offshore and Enlight Renewable

The main advantage of trading using opposite Solstad Offshore and Enlight Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore position performs unexpectedly, Enlight Renewable can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Enlight Renewable will offset losses from the drop in Enlight Renewable's long position.

The idea behind Solstad Offshore ASA and Enlight Renewable Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.